SinoInsight 1
After a meeting with the Central Committee of North Korea’s Workers’ Party on April 21, Kim Jong Un issued a statement that was carried in state media.
Noteworthy points include:
- North Korea would stop testing nuclear weapons and intercontinental ballistic missiles from April 21 because the regime has “realized the nuclear weaponization”
- A major test site would be closed
- North Korea is halting testing as “an important process for global disarmament”
- North Korea will “concentrate all efforts” to achieving a “strong socialist economy” and deliver “groundbreaking improvements in people’s lives”
Many observers are skeptical that Kim is actually halting testing. They also feel that Kim wouldn’t give up the nuclear weapons because they concern the survivability of his regime.
Conversely, we believe that since regime survivability is paramount, Kim would willingly abandon his nuclear program and weapons if the United States and China give him sufficient guarantees that his rule can be preserved. How Kim sells the move to the North Korean people is more crucial.
OUR TAKE
1) After Kim’s secret meeting with Xi Jinping, we wrote on March 26: “Ultimately, Kim Jong Un could have to broker a deal with Xi where he exchanges his nuclear weapons for a lifting of sanctions and keeping his rule over North Korea. How Kim sells this deal to the North Korean elite and people would be his biggest headache.”
The April 21 statement appears to be the first of Kim’s face-saving domestic propaganda moves.
2) Kim’s claim of having “realized the nuclear weaponization” projects the impression to North Koreans that their country would be carrying out diplomatic negotiations as a confident nuclear power on equal footing with other nuclear-capable nations. It is unclear if North Korea has fully functional and deployable nuclear weapons, but Kim’s statement should be believable enough for domestic consumption.
3) Tying the testing halt to the “important process for global disarmament” is a propaganda tactic which lays the foundation for North Korea to disarm without making Kim seem weak or having caved in to other nations. In fact, it would not be implausible for Kim to later claim to his people that North Korea brought “world peace” by taking the lead to disarm and pressuring the other nuclear nations to do likewise.
4) Kim’s rhetoric about focusing on building a “strong socialist economy” hints at him going the “reform and opening up” path. We noted the first signs that Kim is probably taking a leaf out of the CCP and Deng Xiaoping’s book with K-Pop diplomacy after the Xi-Kim summit.
WHAT’S NEXT
Kim’s April 21 statement is another sign that peace is coming to the Korean Peninsula. We believe that North Korea could officially set itself on the path of economy reform after the inter-Korean summit on April 27.
SinoInsight 2
The U.S. Treasury is considering using the International Emergency Economic Powers Act to curb China’s investments in sensitive technology sectors like semiconductors and 5G.
The Act was widely used after the 2001 Sept. 11 attacks in 2001 to freeze the assets of terrorist organizations and other unlawful finance networks.
OUR TAKE
The U.S. government considers Chinese tech giants ZTE and Huawei to be national security risks. We noted in our 2017 semiconductor report that the Chinese Communist Party financially supported the overseas expansion of both companies. With funding, Huawei and ZTE were able to monopolize the mid-to-low end markets with low prices and push its high-tech development.
We believe that Huawei, Lenovo, Alibaba, Hikvision, DJI, and other Chinese tech companies could be hit with U.S. investment restrictions.
